The Socceroos are struggling to adapt to a new 3-2-4-1 system that has yielded a series of negative results.
Only days after the Socceroos were thrashed 4-0 by Brazil in Melbourne, they lost 3-2 to Germany in their first match of the FIFA Confederations Cup, with Ange Postcoglou's three-at-the-back system copping harsh criticism.
Smith has a vast knowledge of Australian football, having been the AIS coach, worked as Football Federation Australia's technical manager as well as having stints as Perth Glory coach and Brisbane Roar assistant coach.
He believes the formation is not the Socceroos' main problem.
"If you don't organise to defend with a back four you have to rely on midfield players tracking runners. That's the choice Ange will have to make ... it's one or the other ... and as a coach you sink or swim on your choices," Smith said.
"I've always been a big fan of using a back three from an attacking perspective to allow a central defender to move into midfield facing forward but I always defended with a back four to fill the space behind the wing back when he pressed the ball.
"If you leave open spaces attackers will run into them so in a zonal system you just try to fill the spaces and have players ready to pick up forward runs.
"To illustrate my point about defending I'd say this: we conceded goals at the 2014 World Cup with a back four and we've conceded goals against similar opposition with a back three so it doesn't really matter which system you have ... it's how you apply it."
Smith expects Postecoglou to stick with his controversial system for the rest of the Confederations Cup and FIFA World Cup qualifiers.
But he insisted it was more about implementation than formation.
He mentioned the goal Brazil's Diego Souza scored in 12 seconds against Australia and Tom Rogic's equaliser against Germany as good examples, noting that they both came about due to possession being lost not because of the formation.
"Ange will persevere with three at the back but it's how the team defends as a unit that is causing concern," he said.
"Let's not forget that many goals are scored in transition and whatever system a team uses often has no bearing on how goals are scored or conceded.
"Any system will have strengths and weaknesses but the fact is if players receive more passes when they can see their immediate opponent they will lose the ball much less than when they can't see their opponent regardless of the system.
"If and when you are pressing high and the opposition play long balls you can use two on one at the back or three on two with a safety valve close by, deciding to employ a back four usually happens when you have been forced back or you choose to defend in your back third.
"So it doesn't matter which system you choose as a coach ... there are principles that have to be applied. It's just a question of how you do it. That's the beauty of football.
"The more often opponents get shots at goal the more you question your defending structures and I'm sure Ange will be doing exactly that, but I say again more chances are created in transition when an attacking move breaks down and players are committed."